What to expect when Apple announces its results this week

Apple has regained the favor of Wall Street, but its latest financial results should reveal the continuing fall of the iPhone that had shocked investors early in the year.

Shares of the mainstream tech giant have added about $ 300 billion since their trough after a profit warning released early January, falling at a time last week less than 1% of the million dollars the company has crossed for the first time last summer.

Still, the drop in iPhone sales is expected to dominate the picture once Apple releases its latest quarterly figures on Tuesday.

Wall Street expects the iPhone's revenues to be 17% lower than the previous year, which is even worse than the 14% drop recorded the previous quarter.

This should leave the company a 5% drop in overall sales, to $ 57.4 billion, a decline comparable to that of the previous three months and a stark contrast to the 16% growth of its fiscal year Previous, when the iPhone X cycle has made Apple the first company worth more than $ 1 billion.

The change in mood on Wall Street in recent weeks is a testament to the growing confidence that the January iPhone shock represented a one-time adjustment to the outlook for Apple's largest business, rather than the beginning of continued deterioration.

Analysts have also turned more to Apple's other business sectors, which offer the best chance of boosting growth.

According to an estimate by Goldman Sachs, the smartphone that has been defining Apple's business for more than a decade is expected to represent only 54% of sales in the last quarter, compared with more than 60% in recent years.

The signs of iPhone stabilization follow small price declines in some international markets, which helped offset some of the negative effects of tariff measures taken last year with the launch of the latest phones.

The successful launch of the iPhone X in 2017 had allowed Apple to drive up the average selling price of its smartphones by more than $ 100, to $ 766, over the next 12 months. But the attempt to repeat the trick last year fell flat, consumers giving a collective yawn to new models and Apple has experienced a sharp decline in consumer spending in China.

After heavy losses at the end of 2018, Apple's market share in China recovered in the first quarter of 2019, according to badyst Neil Cybart at Above Avalon. Apple's financial forecast for the quarter, with a business turnover of between $ 55 and $ 59 billion, may not have been taken into account in the recovery that has took place late in the quarter, he added, increasing the chances of a positive surprise on Tuesday.

The decline in iPhone sales in the last six months should weigh on Apple's forecast for the third quarter of its fiscal year, at the end of June. Most badysts expect a turnover of between 50 and 52 billion dollars, against 53 billion for the same period of the previous year.

Profit margins on the iPhone could also slide in the current quarter following the settlement of the legal war between Apple and Qualcomm, according to a note addressed to customers by badysts Goldman Sachs. The new terms could include Apple paying a higher fee per device, badysts added, qualifying the impact of "difficult to estimate."

Meanwhile, investors are less concerned about the iPhone, investors have turned to other sectors of Apple business for the next wave of growth. The company recently unveiled a range of new subscription services, although most, including a premium video service, have not yet been launched.

Service revenues are expected to rise 16 percent in the last quarter, to $ 11.4 billion, according to Morgan Stanley badysts, who were among those who urged investors to look beyond the iPhone. .

That would represent about 20% of Apple's sales and a much larger share of profits given the higher margin. The Apple Watch and devices such as the HomePod are growing even faster, with sales likely to reach $ 5 billion, according to Morgan Stanley.

Another catalyst for the rise in stock prices, most badysts expected that Apple announced this week the strengthening of its share buyback program and the payment of dividends.

The company announced total redemptions of $ 310 billion since the start of shareholder return in 2012 and by the end of last year had spent $ 247 billion.